Navigating the complex regulations in wholesaling can feel like an uphill battle, especially with growing restrictions in the real estate industry. However, savvy investors like Corey Geary have found innovative ways to not only beat these regulations but also increase their profits per deal. By leveraging novation contracts, Corey consistently earns $28,000 per deal on average, all while staying compliant with local laws. In this blog, we’ll explore his approach and how you can apply it to your own real estate business.

Who is Corey Geary?

Corey Geary is a former blackjack dealer turned real estate investor, now known for his innovative approach to wholesaling. After experiencing significant setbacks early in his career, including a $250,000 loss on a bad deal, Corey found success through persistence and strategic learning. His breakthrough came when he embraced novation contracts—agreements that allow wholesalers to partner with realtors and retail buyers, giving them a way to stay compliant with regulations while maximizing profit. Corey now runs a successful business teaching other investors how to scale their operations using this method.

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Why Wholesaling Regulations Are Increasing

In recent years, several states have begun implementing stricter regulations on wholesaling. These new laws are aimed at controlling practices that some lawmakers view as deceptive or predatory, such as assigning contracts without full transparency to sellers or buyers. In response, many investors have had to adapt by either obtaining real estate licenses or adopting new strategies like novations. For those unfamiliar with novations, they offer a legal and transparent way to continue wholesaling without violating local laws.

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How Novations Work to Beat Wholesaling Regulations

What is a Novation?

‍A novation is a legal agreement that allows the replacement of one contract with another, typically between the seller, the wholesaler, and a retail buyer. Instead of assigning the contract to another investor, novations allow wholesalers to sell to retail buyers through the MLS without needing to hide their profits.

Benefits of Novations:

• Full Transparency: Unlike traditional wholesale deals, which often leave the seller unaware of the wholesaler's profit margins, novation contracts bring full transparency to the table. In a novation, all parties—the seller, wholesaler, and buyer—are aware of the terms, including any assignment fees or profits involved. This openness fosters trust and makes negotiations smoother. By keeping everyone informed, novations eliminate the secrecy that can sometimes cause friction in wholesale deals, making the entire process more collaborative.
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• Access to Retail Buyers: One of the biggest advantages of novations is the ability to access the retail market, rather than being restricted to cash buyers. Retail buyers, who typically use conventional financing, are often willing to pay closer to the market value of a property, unlike cash buyers who look for significant discounts. This opens up more opportunities for wholesalers to maximize their profits, as they can attract higher offers. By tapping into this larger pool of buyers, investors can close more deals at better prices.
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• Regulation Compliant: Novations offer wholesalers a way to stay fully compliant with state regulations that are becoming stricter in many areas. Since novations involve working with licensed real estate agents and listing properties on the MLS, they meet the legal standards set by state regulators. This makes them a safer and more legitimate alternative to traditional wholesaling, which can sometimes face legal scrutiny. By using novations, investors can continue to operate without the risk of violating local wholesaling laws.

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Building a Novation-Based Business Model

Corey Geary’s approach to novations involves integrating this strategy as the primary exit strategy in his real estate business. Here’s how he structures it:

• Adopting Novations as the Primary Strategy: Instead of defaulting to traditional wholesale deals, Corey now focuses on novations. His team only turns to wholesaling when the property condition demands an immediate cash buyer or if a seller needs to close quickly.
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• Partnerships with Realtors: Realtors play a key role in the novation process. Corey works closely with licensed agents to list properties on the MLS, ensuring maximum exposure to retail buyers. Realtors also help manage walk-throughs, inspections, and negotiations, acting as an extension of his team.
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• Marketing and Lead Generation: Corey uses digital marketing strategies, particularly Google Ads, to generate a consistent stream of leads. His focus is on targeting properties where novations can be most effective—usually well-maintained homes that retail buyers are interested in purchasing.

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Increasing Profit Per Deal with Novations

One of the most significant advantages of novations is the ability to increase profit per deal. While Corey’s average assignment fee for a wholesale deal is around $17,000, his novation deals bring in $28,000 on average. Here’s why:

• Retail Buyer Willingness: Retail buyers are typically more willing to pay closer to market value compared to cash investors, who often seek steep discounts. Since retail buyers use traditional financing methods like mortgages, they aren't as focused on maximizing profit margins in the short term, making them more flexible with pricing. This means that by targeting retail buyers, investors can secure higher final sale prices, resulting in significantly larger profits per deal. This is a key advantage of novations over traditional wholesaling.
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• Multiple Offer Scenarios: Listing a property on the MLS opens the door to multiple offer scenarios. When multiple buyers are interested, it often leads to competitive bidding wars, driving up the property’s final sale price. This is a major advantage for wholesalers like Corey, as it creates opportunities to sell properties for significantly higher than anticipated. By encouraging competitive bidding, wholesalers can push buyers to offer more than the asking price, maximizing the profit on each deal. Multiple offer scenarios can substantially increase earnings.
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• Expanding the Buyer Pool: One of the greatest benefits of novations is the ability to expand the buyer pool beyond cash buyers. With novations, wholesalers can market their properties to anyone eligible for conventional financing, which includes a much larger portion of the buying market. This dramatically increases the likelihood of closing deals faster and at better prices. Expanding to retail buyers through novations gives wholesalers access to a broader, more varied group of buyers, increasing both the number of deals and their overall profitability.

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To follow Corey Geary’s strategy and implement novations in your own real estate business, start by familiarizing yourself with the legal aspects of novation contracts. Build strong partnerships with realtors who can help you list properties on the MLS and manage the sale process. Next, focus on lead generation through digital marketing channels like Google Ads to consistently find motivated sellers. Finally, ensure you have a clear system in place for managing deals, from initial contact to closing, to maximize efficiency and profit on each transaction.

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FAQs

Q: What is a novation in real estate wholesaling?
A: A novation is a legal agreement that replaces one contract with another. It allows wholesalers to sell directly to retail buyers through the MLS, making it fully compliant with state regulations.

Q: How do novations help avoid wholesaling regulations?
A: Novations involve complete transparency between all parties and allow wholesalers to work with realtors and retail buyers, which aligns with many state regulations that are designed to prevent deceptive practices.

Q: Can novations increase profit per deal?
A: Yes, novations typically result in higher profits because they open the deal to retail buyers who are often willing to pay closer to market value. Corey Geary averages $28,000 per novation deal, compared to $17,000 for wholesale deals.

Q: Do you need a real estate license to execute novations?
A: No, you don’t need a real estate license to use novations, but partnering with a licensed realtor to list the property on the MLS is essential to maximizing exposure and compliance.

Q: How can I start using novations in my wholesaling business?
A: Start by learning the legal aspects of novations, ensuring you have the right contracts in place, and building partnerships with realtors. You can also explore courses and coaching programs like Corey Geary’s Novation Nation to get started.

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Conclusion

As wholesaling regulations continue to evolve, it’s crucial for investors to adapt by adopting strategies like novations. Corey Geary’s approach shows that by embracing novations, wholesalers can stay compliant with state regulations, access a larger pool of buyers, and significantly increase their profit per deal. For those looking to scale their real estate business and avoid the pitfalls of changing laws, novations offer a game-changing solution.

Additional Resources

For more information on scaling real estate business, check out these resources:

• Hesel Media: PPC and Meta Ads Management
• Remote Latinos: Lead Manager Placement

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